Refer to the information provided in Figure 26.5 below to answer the question(s) that follow. Figure 26.5
-Refer to Figure 26.5. An increase in government spending shifts the ________ to the ________.
A) IS curve; left
B) Fed rule; right
C) IS curve; right
D) Fed rule; left

Question

Refer to the information provided in Figure 26.5 below to answer the question(s) that follow.  Figure 26.5
-Refer to Figure 26.5. An increase in government spending shifts the ________ to the ________.
A) IS curve; left 
B) Fed rule; right 
C) IS curve; right 
D) Fed rule; left

Quizplus · Accepted Answer

An increase in government spending would shift the IS curve to the right. The IS curve represents all the combinations of interest rates and output levels at which equilibrium exists in the goods and services market. An increase in government spending would increase aggregate demand and lead to a higher level of output at each interest rate. Therefore, the IS curve would shift to the right.

Refer to the Information Provided in Figure 26